Gov. Laura Kelly cold-shouldered pleas from Republican lawmakers Tuesday to rescind an order requiring out-of-state online businesses to collect an estimated $20 million annually in sales taxes despite the attorney general's opinion the Democratic governor lacked authority to enforce the mandate.
Attorney General Derek Schmidt issued a nonbinding opinion at the request of House and Senate GOP leaders, who immediately responded by demanding that Kelly nix the August order issued by the Kansas Department of Revenue. On Tuesday, the governor said tax instructions applicable to thousands of nonresident businesses reflected existing state law and would promote tax fairness.
"This is about protecting our friends and neighbors doing business on Main Street and throughout our local communities across Kansas," Kelly said. "They are working hard, playing by the rules and deserve to be on a level playing field with out-of-state retailers."
House Speaker Ron Ryckman and Senate President Susan Wagle, both Republicans, urged the state's GOP attorney general to consider whether the Kelly administration was on solid legal ground in August when the Department of Revenue revealed all out-of-state retailers with sales in Kansas had to start collecting and remitting Kansas tax on Tuesday.
The opinion released Monday by Schmidt indicated the revenue department's policy was "not lawfully adopted" because it hadn't undergone a public hearing before setting of a new administrative rule or regulation. He said the action wasn't based on an exercise of statutory authority by the revenue department.
Ryckman, the House speaker from Olathe, said Schmidt's analysis showed the sales tax notice to be "an unlawful tax mandate by her administration."
"The governor seems to think she can occupy the role of both the Legislature and the governor's office," said Wagle, a Wichita legislator running for U.S. Senate. "I call on Governor Kelly to rescind her notice to prevent costly litigation against the state."
Senate Minority Leader Anthony Hensley, D-Topeka, said he was puzzled by Schmidt's view on the Department of Revenue's plan to enforce sales tax law on out-of-state businesses. He said Wagle, Ryckman and Schmidt were playing partisan politics.
"I see Derek Schmidt using the office of attorney general much like Kris Kobach used the office of secretary of state," Hensley said.
Hensley said Schmidt, while serving in the Senate, was the lone vote against a bill in 2003 designed to impose additional sales tax obligations on out-of-state companies. He said Schmidt did so to protect interests of an Amazon facility in his Senate district. In terms of the latest sales tax dispute, Hensley said, Schmidt again sided with out-of-state interests.
House Minority Leader Tom Sawyer, D-Wichita, said the Legislature in 2003 established a clear policy objective to include mail order or online businesses in the sales tax system in Kansas. The attorney general appears willing to sidestep legislative intent, he said.
"I read the opinion and ... he's trying to say the Department of Revenue can't enforce current Kansas law. It didn't make any sense to me," Sawyer said.